Aarti Tibrewala Darooka, a chartered accountant and MBA, is an entrepreneur and financial literacy advocate. She has over 15 years of combined experience in consulting, advisory and travel industries. A national ranker in CA, Aarti is a published author, who has written a plethora of books for children’s financial education and is currently helping build awareness for financial literacy for women through her platform, Sthreedhan.
“A good teacher is a master of simplification and an enemy of simplism”. – Louis A.Berman (Author)
As a teacher, you have spent your life simplifying the most complex of concepts for the minds of the young. Your energies are diverted towards updating your knowledge in your chosen field to ensure that your wards are not left behind in this discipline. This is your purpose and your pride. Perhaps this leaves you with little time and energy to understand the complexities of the more mundane aspects of life – such as money.
There are many a term that one hears while talking about salaries and money that make it seem too complex and not worth your time. Let’s try and understand some of the most commonly misunderstood salary jargon.
For anyone drawing a salary, there is a lot of confusion between three terms – CTC, Gross Salary and Net Salary. What’s the difference between them? Well, here it is.
CTC means Cost-To-Company, or your employer school in this case. It refers to the total value of not just the salary that the school is paying you but also other direct benefits, indirect benefits, contributions to Provident Fund/Gratuity/other retirement funds, food coupons, daily transport facility, etc that the school may be providing to you. Basically it is a term that captures what it costs for the school to employ you. This figure will always be much higher than the salary that you actually receive in your bank account.
Next is Gross Salary, This is the sum of items like your basic pay, dearness allowance, house rent allowance and other benefits that are paid out as cash to you, but is calculated before removing any deductions whatsoever. So if there no contribution from your end to things like provident fund and no taxes at all, this is the amount you would’ve received in your account.
Finally, there’s Net Salary. Net Salary is what you do get in your account after removing your contribution to any funds as made compulsory by the law or by your school’s policy and income tax on your salary.
You may ask why is it important to know the difference between these terms? If you are someone who has a higher requirement for cash than savings at the present, although your CTC may look big, you may realise that you are not getting enough cash in the bank to meet your needs
Or that your employer school adds the value of many things that you are not using but is still being considered as a benefit to you.
For example, the school may have included the school bus transport cost for one person in your CTC but you may not be using the school bus for your daily commute. So you are spending from your pocket on getting to work and not getting reimbursed by the school. You may want to go back to your salary slip and actually check whether you are getting a transport allowance instead of the using the school bus service.
Similarly, your school may be including the cost of certain training programs in your CTC but you may not be attending those. You could check with the school accounts department whether you can claim the equivalent value of the course as reimbursement towards any other courses that are relevant to your subject.
You could be incurring a loss by not going through your salary break-up in detail. So better to educate yourself on the components of your CTC, what is trickling down from that into your gross salary and what is finally coming into your net salary.
After all, ignorance is not always bliss.
This article originally appeared in the TeacherTribe Magazine October 2021 edition.